Rudy Dix (far right), Director of Project Management in the Office of the President, speaks at the Investment Summit in Cape Town. From left: Stanlib Chief Economist Kevin Rings and Traxtion Group CEO James Hawley. (Provided/Investment Summit)
- By April next year, a new organization will be in charge of South Africa's rail infrastructure.
- Rudy Dix, director of the Office of Project Management in the President's Office, said there should be a move to establish Transnet Freight Rail as a rail operator only by September.
- Speaking at an investment summit in Cape Town on Wednesday, he said the government wanted to increase the number of private rail players and Transnet could not be a “umpire and player”.
- For more financial news, visit: News24 Business Top Page.
By April next year, a new organization to manage South Africa's rail infrastructure will be separated from Transnet Freight Rail (TFR). TFR needs to remain a rail operator and compete with private companies.
Rudy Dix, director of the Office of Project Management in the Office of the President, said there should be at least some movement toward separation by September. The rail-only operator should probably be fully operational by April next year.
By then, the necessary laws for open access to rail should be in place and competition should be possible.
Speaking at an investment summit in Cape Town on Wednesday, he said the government wanted to increase the number of private rail players and Transnet could not be a “umpire and player”.
Mr Dix said the rail network was in a dire state and the Northern Cape's iron and manganese lines were currently in such disrepair that they would not be operational without urgent investment.
Mr Dix said significant funding was needed to get Transnet back on track, adding:
Transnet submitted a restructuring plan to the Treasury last year calling for a R100 billion injection. However, nothing was included in last month's national budget. Mr Dix said it would be “very difficult” to get anything from the Treasury given the mounting government debt.
One option would be to take advantage of the R47 billion debt guarantee provided by the Treasury in December to support debt refinancing.
The other is that the private sector puts in capital and that capital is offset against rail access charges.
Mr Dix said the government had learned from its mistakes following the recent disastrous auction of two lines to private railways. Very few companies applied. The main reason was that this slot was only available for his two years, and any large investment was risky.
James Hawley, CEO of Traxtion Group, one of the bidders, said South Africa should cut the number of railways it operates by half. Currently, its railway network spans 22,000 km, which accounts for 85% of Africa's railway lines.
This should be reduced from 10,000km to 12,000km, which would allow for more centralized management, he said. From 1980 to 2020, freight railroads operating in North America were reduced by 50%, but during that time, tonnage transported doubled.
“That's how we make railways work, doing more with less. That's the first thing we can do in South Africa.”
Mr Hawley said there was a strong business case for private companies to become involved in South Africa's bulk rail. Transport by road is much more expensive than by rail. Therefore, by providing companies with a cheaper rail option (in some regions the cost of trucking can triple), it means that they can earn substantial profit margins to make the system work. Masu.
Hawley pointed out that Transnet spent just R2.7 billion on maintenance last year, compared to R3.4 billion in 2012. He calculated that there had been a R30 billion underspend on maintenance over the past 11 years. However, spending on salaries has increased by R5 billion since 2012.
Mr Dix admitted that necessary maintenance was not being carried out across Transnet, not only at Transnet where a signaling system to coordinate trains does not yet exist, but also at ports. He said there was a “graveyard” on one side of Cape Town Port, with major equipment not working because no major maintenance had been carried out five years ago.
Dix says the success of in-house power generation could be replicated on the railways. He said allowing in-house power generation had generated an investment of R220 billion in 18 months.
Mr Dix said Mr Ramaphosa wanted closer partnerships with businesses and that this would be his legacy at the end of his term.
The article has been revised to remove the following mention: The infrastructure manager will be located in the Department of Transport. This was not mentioned during the panel discussion.
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